Update on Accountable Care Gulf Coast MGMA Meeting September 14, 2011

1. Update on Accountable CareGulf Coast MGMA MeetingSeptember 14, 2011 John Watson, MS, CMPEJonathan Ishee, JD, MPH, MS, LLM Northwest Diagnostic Clinic, PA and Access Health Providers

2. Disclaimer • This information is provided for educational use only. Individuals should seek the advice of an experienced attorney before participating in an ACO or other shared savings program to ensure compliance with applicable law.

3. Overview • Payment Reform Initiatives • Federal • ACOs • Patient Centered Medical Home • CMMI • Bundled Payment • Other Initiatives • State • SB8 - Health Care Collaborative (HCC) • Implications for Practices • Questions

4. Accountable Care Organizations • Background • Established under the Patient Protection and Affordable Care Act (“PPACA”) • An ACO is an organization of physicians and other health care providers accountable for the overall care of traditional fee-for-service Medicare beneficiaries who are assigned by CMS to an ACO • ACOs will be financially incentivized to provide higher quality care and overall cost savings

5. Accountable Care Organizations • Required Processes • An ACO must provide CMS with documentation of its plans to: • Promote evidence-based medicine (EBM) • Promote beneficiary engagement • Internally report quality and cost metrics • Coordinate care

6. Accountable Care Organizations • Patient Centered • The ACO must have a mechanism in place for the coordination of care, e.g. via use of enabling technologies or care coordinators • An ACO is required to describe its mechanisms for coordinating care for Medicare beneficiaries. • An ACO should have a process in place to exchange summary of care information when patients transition to another provider or setting of care, both within and outside the ACO.

7. Accountable Care Organizations • CMS proposes retrospective assignment based on primary care utilization • Two Track Model • Track One • One-Sided Model (with a twist) • No Downside Years 1 and 2 • Year 3: add Risk (Loss) and higher reimbursement • Two Sided • Two-Sided Model • Upside and downside Risk starting Year 1 • ACO accepts downside risk for Losses once the Minimum Loss Rate (MLR) is exceeded • Higher reimbursement starting Year 1

8. Accountable Care Organizations • To be eligible for shared savings, ACOs must: • Meet all contractual requirements of the ACO Agreement • Meet the quality performance standards • Realize savings compared to the Expenditure Benchmark that exceed the Minimum Savings Rate

9. Accountable Care Organizations

10. Accountable Care Organizations • Statutory Mandates: • Estimate Expenditure Benchmark and update for each agreement period • Using most recent available 3 years of per beneficiary expenditures for Part A and B services for Medicare FFS beneficiaries assigned to ACO • Adjust Expenditure Benchmark for beneficiary characteristics and such other factors as the Secretary determines appropriate • Update the Expenditure Benchmark by the projected absolute amount of growth in the national per capita Part A and B expenditures for Medicare FFS beneficiaries

11. ACOs - Adjusting the Expenditure Benchmark • Adjustment for beneficiary characteristics • Propose using CMS-HCC, which uses beneficiary diagnostic information • Considered just using beneficiary demographic information and/or coding intensity cap • Propose no adjustments for IME and DSH • Propose retaining geographic payment adjustments in calculating Expenditure Benchmark • Propose different treatment for bonus payments/penalties depending on statutory source • In Years 2 and 3 of the Agreement Period, the Expenditure Benchmark is adjusted using a flat dollar increase amount to take into account the absolute amount

12. CMMI Initiatives

13. Bundled Payment • Must Apply to Participate • Four Model Approach • Three models involve a retrospective bundled payment arrangement, and one model would pay providers prospectively.   • Structure must be in compliance with state laws

14. Bundled Payments • Models based on Retrospective Payment: • Model :1define the episode of care as the acute care hospital stay only • Model 2: the acute care hospital stay plus post-acute care associated with the stay • Model 3: or just the post-acute care, beginning with the initiation of post-acute care services after discharge from an acute inpatient stay. • Model Based on Prospective Payment • CMS would make a single, prospective bundled payment that would encompass all services furnished during an inpatient stay by the hospital, physicians and other practitioners.

15. Bundled Payments • Application Deadlines: • Letter of Intent • Model 1: September 22, 2011 • Models 2-4: November 4, 2011 • Final Application • Model 1: October 21, 2011 • Models 2-4: March 15, 2012

16. SB8 – Health Care Collaborative • What is an HCC? • that undertakes to arrange for medical and health care services for insurers, HMOs, and other payors;  • that accepts and distributes payments for medical and health care services;  • that consists of physicians, physicians and other health care providers, or physicians, other health care providers and HMOs or insurers; and  • that is certified by the commissioner to lawfully accept and distribute payments to physicians and other providers using the reimbursement methodologies authorized by this chapter.

17. Health Care Collaborative • Allows for certified HCCs to arrange to provide health care services under contract with governmental or private entities. • HCC must demonstrate: • Increases collaboration among health care providers and integrates services;  • Promotes improvement in quality based health care outcomes;  • Reduces the occurrence of potentially preventable events;  • Includes processes that contain health care costs;  • Contains governance requirements, including an even number of physician board members if the governing board is composed of both physicians and other providers. • Requires the HCC governing board to establish a compensation advisory committee to develop and make compensation related recommendations.

18. Health Care Collaborative • The commissioner of insurance must also conduct an initial antitrust review to determine: • The HCC is not likely to reduce competition in any market for physician, hospital, or ancillary health care services due to the size or composition of the HCC;  • The pro-competitive benefits of the applicants proposed HCC are likely to substantially outweigh the anticompetitive effects of any increase in market power.

19. What does this mean for…?

20. Primary Care Physicians …need respect…

21. PCPs should be driving • Pick your partner carefully…one shot • Hospital • Health plan • Other entity (e.g. 5.01(a) or IPA) • Referral management • Directed vs. self-referrals • Tight networks mean more consistency • Know your patients and manage expectations • How much say do you want? • Governance issues

22. This isn’t an HMO • “Retrospective attribution” • Self-referral • Specialist “network” • Patient non-compliance

23. Reimbursement alternatives • (Choices apply to almost all specialties) • FFS • Bundled payments • Full risk

24. Specialists …need referrals…

25. Outcomes and evidence • Generally not limited to a single ACO • Become the “go to” group for referrals • Track and benchmark outcomes • Understand the cost of providing care • Bundled payments vs. capitation

26. Hospitals …need admissions…

27. The 500-pound gorilla • Some hospital systems very well positioned • Using EMR as leverage to elicit physician enrollment • Will they convert to a cost-based system, or continue to rely on admissions to drive profits?

28. Health Plans …need premiums… …and a provider network…

29. Most are still acting like payers • Chronic condition programs • Token payments for meeting objectives • Emphasis on patient-centered medical home initiatives

30. What happens if you partner? • Access to capital & systems, but… • Can this model work with other payers, or are you limited to Medicare?

31. Takeaways • After a disappointing launch, CMS appears to be seeking innovative proposals that have more opportunities • ACO selection is more critical for primary care than specialist practices • If you’re not moving towards a specialty-specific PCMH strategy, you should be

32. Questions Please Contact: John Watson: jwatson@nwdc.com Jonathan Ishee: jisheejd@nwdc.com

33. Appendix- Shared Savings

34. Appendix

35. Appendix